Re: short term bond funds
Intermediate term bond funds will be hurt less than long term funds and short term funds will be hurt even less
The rule everyone uses is: Multiply the average duration of the bond fund by the increase in interest rates. That will give you the amount the NAV can be expected to decrease.
For example, a bond fund has an average duration of 3 yrs. Alan greenspan raises interest rates (over some period of time, hopefully not overnight) by 2%
The NAV of the bond fund will fall by 6%. $100,000 bucks in that fund would fall to $94,000. Also, over time the yrold of the fund would begin to rise because the the portfolio would be acquiring newer, higher yirld bonds and the older , lower yielding bonds in the portfolio would be retired.
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